A realtor called me the other day. I was marketing the new reverse mortgage purchase money available after the first of the year.
The realtor lady showed interest in the purchase program, but before getting needed answers, she decided to go into a long drawn-out story about a person wronged by a reverse mortgage company.
In efforts to stop the rampant spread of misinformation, falsehoods, mythology and every other "ology" you must read this entire article. You can't read the next four or five paragraphs, stop, and tell everyone you know the painful effects of the reverse mortgage.
Like most stories that may not be true the story is told second, third or fourth hand. In this case, the agent had a girlfriend, who's friend's father had a reverse mortgage on his home. After his passing the home made it's way into the hands of the FOAFOAR (I'm going to use this acronym for the Friend Of A Friend Of A Real estate professional).
It's a bit of a rareity but the home was valued less than the mortgage amount. It can happen with drastically falling values. Naturally, when her father passed away the mortgage company called the entire note due.
To repay the reverse mortgage lender the FOAROAR sold the property and had to come out of saving an addition 40 thousand dollars to cover the deficiency.
Did this happen? I seriously doubt it. The reason is reverse mortgages are known as non-recourse loans. This means in the circumstance of the FOAFOAR the mortgage company cannot come after the heirs for the difference.
In the circumstance of a deficiency or negative equity the borrower or estate conduct the sale of the property as follows....
A realtor will be hired to market the property at a fair market value. Yes, the bank will want to know this and will check comparable sold properties to be sure. The house will sell, and the bank will be repaid the sale price minus closing costs.
Per FHA rules this net amount is what the reverse mortgage lender can get from the borrower or heirs. It can't get the remaining balance, if one exists. It's not a great deal for the lender. It must write off the difference as a loss.
Enough myths exist about the reverse mortgage to fill a book. I thought this example a good one because it does come up a lot. If deciding whether a reverse mortgage is right for you, make sure you get professional advice, rather than chatting with the guy at the coffee shop who "knows someone who knows someone". - 15224
The realtor lady showed interest in the purchase program, but before getting needed answers, she decided to go into a long drawn-out story about a person wronged by a reverse mortgage company.
In efforts to stop the rampant spread of misinformation, falsehoods, mythology and every other "ology" you must read this entire article. You can't read the next four or five paragraphs, stop, and tell everyone you know the painful effects of the reverse mortgage.
Like most stories that may not be true the story is told second, third or fourth hand. In this case, the agent had a girlfriend, who's friend's father had a reverse mortgage on his home. After his passing the home made it's way into the hands of the FOAFOAR (I'm going to use this acronym for the Friend Of A Friend Of A Real estate professional).
It's a bit of a rareity but the home was valued less than the mortgage amount. It can happen with drastically falling values. Naturally, when her father passed away the mortgage company called the entire note due.
To repay the reverse mortgage lender the FOAROAR sold the property and had to come out of saving an addition 40 thousand dollars to cover the deficiency.
Did this happen? I seriously doubt it. The reason is reverse mortgages are known as non-recourse loans. This means in the circumstance of the FOAFOAR the mortgage company cannot come after the heirs for the difference.
In the circumstance of a deficiency or negative equity the borrower or estate conduct the sale of the property as follows....
A realtor will be hired to market the property at a fair market value. Yes, the bank will want to know this and will check comparable sold properties to be sure. The house will sell, and the bank will be repaid the sale price minus closing costs.
Per FHA rules this net amount is what the reverse mortgage lender can get from the borrower or heirs. It can't get the remaining balance, if one exists. It's not a great deal for the lender. It must write off the difference as a loss.
Enough myths exist about the reverse mortgage to fill a book. I thought this example a good one because it does come up a lot. If deciding whether a reverse mortgage is right for you, make sure you get professional advice, rather than chatting with the guy at the coffee shop who "knows someone who knows someone". - 15224
About the Author:
Learn about other folklore plus five monster blunders at the Reverse Mortgage Texas Guide. To learn some great questions to ask try 5 big league inquiries for your Texas Reverse Mortgage lender.
